Retail funds will move to younger clients

The retail funds industry has traditionally focused on clients aged 45 and over but this will need to change as Baby Boomers draw down on their wealth, which could potentially pose a threat to industry funds, according to Tria Investment Partners.

The firm’s partner, Oliver Hesketh said in a post that while industry funds traditionally dominated with the 45 and under age cohort, retail funds and financial advisers would begin to broaden their target market to the 35+ age bracket as limiting their scope to just older clients would no longer be sustainable as Baby Boomers reached retirement and comprised a smaller part of the industry over time.

“The appeal of targeting those under the age of 45 has been limited to date – primarily because these individuals’ account balances are mostly too small to be economic, but also because it’s been difficult to get younger people to engage with superannuation,” Hesketh said.

However, according to Tria, average balances of those in the 35 to 44 age bracket was currently around $90,000, with their balances likely to more than double to $229,000 by 2025. They would have more than $700 billion in superannuation assets in aggregate.

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Hesketh said three questions now remained, including when retail funds would begin targeting younger members, who would thrive with this cohort and whether they would gain sustainable competitive advantage by being first to market.

He also asked how retail funds would engage with this cohort given the difficulty in doing so with a group where retirement was in the distant future.

Finally he asked how industry funds would respond: “Younger members have traditionally been the domain of industry funds. As they start to gain momentum with pension members, how will they respond to an attack on those approximately 15 years from retirement?”